Oriental Weavers plans to raise the selling price of all its carpet products by 7%.
In an investment report obtained by Daily News Egypt, the company attributed the move to the desire to maintain the profitability margins following the rise in the cost of raw materials in US dollars following the devaluation of the Egyptian pound.
The company’s high-quality products are expected to see more demand from the domestic market in the coming period, in light of the restrictions on carpet imports.
The company has relied on its growth in sales in the domestic market to offset weak exports. This technique successfully increased the company’s revenue during the first quarter of 2016 by 1% to a record EGP 1.458bn compared to revenues of EGP 1.441bn during the same period last year.
The domestic market sales registered EGP 675bn in the first quarter, recording an annual growth rate of 9%. The growth was driven by the company’s new production lines and opening of three new branches, boosting the total number of branches to 232.
Exports of Oriental Weavers fell at an annual rate of 5% during the first quarter down to EGP 783m. This was due to fierce competition with Turkish and Chinese products and the decrease in demand of some major clients of the company.
Meanwhile, sales in the US market rose at an annual rate of 31%, thanks to the addition of new production lines and new contracts from home furnishing franchises, as well as expanding the supply of carpets to the hospitality sector. The growth is expected to continue during the second quarter of 2016.
The investment report noted that the Export Committee at Oriental Weavers penned a plan to help its subsidiary company MAC out of the exports decline under the rising cost of raw materials and the declining demand from the Gulf and a few European countries prompted by market saturation.
Oriental Weavers explained that the plan is based on introducing new production lines that offer high-speed soft yarn collections, as well as opening new markets in Asia, Central and Eastern Europe, Africa, and Australia by providing a range of innovative carpet products.
Hany Genena, head of investment research at Beltone, said that Oriental Weavers’ work ethic has enabled it to absorb the hits and fierce competition in some overseas markets.
He added that the company continued its strategy to increase domestic sales to enhance total sales and avoid the impact of the declined exports in the first quarter of the year. Earnings before interest, taxes, depreciation, and amortisation maintained the same level at 16%.
However, net profit fell to EGP 94.17m compared to a net profit of EGP 152.68m during the period of comparison.
Genena attributed the fall to the company’s suffering from currency exchange losses worth EGP 50.4m. Moreover, another reason for the fall is allocating EGP 20m and offering discounts on the exports market due to rising competition.
Genena predicted that Oriental Weavers would record strong sales in the domestic market during the second quarter, as the summer is the peak season for demand on carpets.